Interglobe Aviation Limited (IndiGo), India's leading airline, has received a significant boost to its credit profile as ICRA Limited upgraded its long-term credit rating to [ICRA]AA with a Stable outlook. This upgrade from the previous [ICRA]AA- rating reflects the airline's strong operational and financial performance in a recovering aviation sector.

Credit Rating Upgrade

ICRA has upgraded IndiGo's long-term credit rating for bank facilities totaling Rs 9,000.00 crore. The rating agency reaffirmed the short-term rating at [ICRA]A1+, which is the highest rating in this category. This upgrade is a testament to IndiGo's robust financial health and market leadership.

Strong Financial Performance

The credit rating agency cited several factors contributing to this upgrade:

• Healthy passenger traffic growth of 11% year-on-year
• Capacity expansion of 13% in terms of available seat kilometers (ASKM)
• Revenue surge of 17% to Rs 80,803.00 crore
• Comfortable liquidity position of Rs 33,153.00 crore

Market Leadership

IndiGo has significantly strengthened its position in the domestic aviation market:

• Domestic market share increased to 63%, up from 48%
• Operating 434 aircraft, connecting 91 domestic and 40 international destinations
• Average load factor of 86%

Fleet Expansion and Future Outlook

The airline continues to expand its fleet and network:

• Current fleet of 434 aircraft includes a mix of Airbus A320 family, ATRs, and leased wide-body aircraft
• Order book of around 945 aircraft, including A320/A321 NEOs, A321 NEO XLRs, and A350s
• Deliveries scheduled in a phased manner till 2035
• Plans to add more than one aircraft per week over the medium term

ICRA expects IndiGo's net debt to EBITDAR ratio to remain between 1.70-2.00 times over the medium term, despite the planned fleet expansion.

Dividend Announcement

In a positive development for shareholders, IndiGo has announced its first dividend in six years, signaling confidence in its financial stability and future prospects.

Challenges and Mitigations

While the airline faces challenges such as geopolitical tensions and potential travel hesitancy, it is actively mitigating risks through:

• Expansion of international operations
• Introduction of wide-bodied aircraft
• Launch of business class model (IndiGo Stretch)

The credit rating upgrade underscores IndiGo's resilience and strong market position in the Indian aviation sector. As the airline continues its expansion plans and maintains its financial discipline, it appears well-positioned to capitalize on the growing demand for air travel in India and beyond.

Indian airlines witnessed a notable uptick in passenger traffic in June, with the sector showing signs of continued recovery and growth. The latest data reveals interesting shifts in market dynamics among major carriers.

Passenger Growth and Market Share

Indian airlines transported 1.36 crore passengers in June, marking a 3.00% increase from 1.32 crore passengers in May. This growth is particularly significant when compared to the same period last year, indicating a positive trend in the aviation sector.

Interglobe Aviation , operating as IndiGo, the market leader, experienced a marginal decline in its market share, moving from 64.60% in May to 64.50% in June. Despite this slight dip, the airline continues to dominate the Indian aviation market.

In contrast, the Air India Group saw an increase in its market share, rising from 26.50% in May to 27.10% in June. This growth suggests potential gains in the group's competitive position.

Akasa Air maintained its market share at 5.30%, showing stability in its operations. However, SpiceJet faced challenges, with its market share dropping from 2.40% in May to 1.90% in June.

Year-to-Date Performance

The first half of the year has shown promising results for the Indian aviation sector. From January to June, domestic airlines carried 851.74 lakh passengers, compared to 793.48 lakh in the corresponding period last year. This represents a substantial 7.34% annual growth, indicating a robust recovery in air travel demand.

Operational Challenges

While the sector shows growth, airlines continue to face operational challenges:

• The flight cancellation rate in June stood at 0.93%.
• Technical issues were the primary reason for cancellations, accounting for 37.00% of all cases.
• Operational reasons and weather conditions followed, responsible for 25.00% and 22.40% of cancellations respectively.

Passenger Impact and Compensation

The disruptions in June had significant impacts on passengers and airline finances:

• Flight delays affected 1,20,023 passengers.
• Airlines spent Rs 1.68 crore on passenger facilitation due to delays.
• Cancellations impacted 33,333 passengers.
• Carriers paid Rs 72.40 lakh in compensation for cancellations.

These figures highlight the ongoing challenges in maintaining smooth operations and the financial implications for airlines in managing disruptions.

As the Indian aviation sector continues to grow, the coming months will be crucial in determining whether airlines can maintain this growth trajectory while improving operational efficiency and market positions.